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NZD/JPY Price Analysis: Bears position for a 1:3 risk-reward setup

  • Bearish conditions and synergy throughout the time frames open a high probability setup.
  • NZD/JPY bears get set up for a 1:3 risk to reward swing trade.

NZD/JPY is in a bearish environment on the charts and is offering a downside opportunity for a 1:3 risk to reward in a high probability setup.

The following is a top-down analysis which illustrates the bearish environment and where an opportunity has arisen on the 4-hour time frame for a swing trade. 

Monthly reverse head and shoulders

As can be seen, the price is suppressed below a descending trendline. The price is currently trading against it.

While there is potential for a continuation to the upside to the resistance, either way, the end result will be a reverse head and shoulders should either resistance hold and the price meets demand at the support structure prior to heading north again. 

Meanwhile, there could be a selling opportunity at this juncture and the lower time frames can be inspected for confirmation of the bearish bias.  

Weekly chart, bearish Impulse extension expected

The weekly chart shows that there has been a correction of the bearish impulse.

After a correction, a bearish extension is expected in wave-3. 

The correction has been resisted at trendline resistance.

Daily chart

The daily chart shows that the price has recently corrected a daily bearish impulse by a 61.8% Fibonacci retracement and has been rejected with force. 

The above analysis confirms the monthly bearish bias.

4-hour setup

The price has already started to break the trendline support from a resistance area and is expected to fill in the downside wick from an hourly perspective.

This will expose the downside below the trendline support on the 4-hour chart and potentially draw in further supply to boost the cross lower and towards the target area.

The setup offers a 1:3 risk to reward ratio:

The strategy requires the stop loss to be moved to breakeven as soon as there is new resistance structure formed as the price melts towards the target. 

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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